The Comptroller and Auditor General of India (CAG) has raised concerns on Himachal Pradesh debt burden growing at an alarming rate as the hill state continues to raise market borrowings to repay interest and outstanding liabilities, instead of capital creations and development activities .
The overall fiscal liabilities of the state increased from Rs 41,197 crore in 2015-16 to Rs 62,212 crore in 2019-20 registering an increase of 51.01 per cent, mainly due to increase in internal debt to the tune of Rs 12,666.85 crore and public account liabilities of Rs 8,352.80 crore, the report says.
The copy of the report was also tabled in the state assembly by Chief Minister Jai Ram Thakur on the last day of the state assembly’s winter session at Dharamshala on Wednesday.
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The overall fiscal liabilities increased by 14.57 per cent in 2019-20,which is quite a high in the pre-Covid period. This was only at 6.41 per cent in the previous year.
The ratio of fiscal liabilities to GSDP ( Grass State domestic Product) has also increased from 36.06 per cent in 2015-16 to 37.60 per cent in 2019-20.
It is significant to note that fiscal liabilities at Rs 62,212 crore were higher than the target of Rs 57,518 crore projected in the Medium Term Fiscal Policy cum Fiscal Policy Strategy (MTFPS ) for the year 2019-20.
The percentage of outstanding debt to GSDP remained between 35 and 38 per cent over the last five years (2015-20).
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Shockingly a high 59 to 77 per cent of the debt receipts were used for repaying past obligations during the period 2015-16 to 2019-20 by the state which can’t be a prudent fiscal management .
The report also highlights a glaring fact that internal debt of the state Government has also increased by Rs 4,698 crore (77.28 per cent) from Rs 6,079 crore in 2015-16 to Rs 10,777 crore in 2019-20. An interest of Rs 2,985.69 crore was paid on internal debt during 2019-20.
Another irregularity which the CAG has pointed out relates to market borrowings of the internal debt with an interest rate ranging between 6.30 and 9.75 per cent.
In 2019-20, out of total internal debt receipts of Rs 10,777 crore, market loans were worth Rs 6,580 crore. Further, of total internal debt repayments of Rs 6,612 crore, repayment of market loans was around Rs 2,120 crore, yet the outstanding market borrowings as on March 31 2020 were Rs 28,142 crore.
With regard to heavy borrowings in a non-pandemic year, it was stated by the state government in the exit conference, that for 2019-20, against the estimated receipts under State’s share in Central taxes and duties Rs 7,398 crore) but the GoI revised the estimates downwards to Rs 5,769 crore.
Even then, the actual amount released to the state government was only Rs 4,677 crore as receipt under the state's share in Central taxes and duties. This led the State government to resort to further borrowing
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The situation looks more grim in the coming years in view of public debt growing at a faster rate ,less funds available for the development and capital creations and higher volume of outstanding public debt at Rs 62,234 crore of which Rs 21,662 crore is interest liability --Rs 6,735 crore payable in the next year. Thirty nine per cent i.e. Rs 24,302 crore is to be paid over next 1-5 years’ time.
The report has suggested the government to make efforts for augmentation of its own tax revenues, settle the pending tax claims timely and improve non-tax revenues towards better resource mobilisation, besides exploring ways of ensuring reasonable return on capital invested in profit making state PSUs in view of the substantial high cost of borrowings .
